The full name of stock index futures is stock price index futures, which can also be called stock index futures and futures index, and refers to standardized futures contracts with stock index as the subject matter. Both parties agree that on a specific date in the future, they can buy and sell the subject index according to the size of the stock index determined in advance. As a type of futures trading, stock index futures trading and ordinary commodity futures trading have basically the same characteristics and processes.
1. Stock index futures have the same characteristics as other financial futures and commodity futures
Contract standardization. The standardization of futures contracts means that all terms of futures contracts except price are pre-specified and have the characteristics of standardization. Futures trading is conducted by buying and selling standardized futures contracts.
transaction centralization. The futures market is a highly organized market, and a strict management system is implemented, and futures trading is completed centrally in the futures exchange.
hedging mechanism. Futures trading can end the performance responsibility through reverse hedging operation.
daily debt-free settlement system. After the daily trading, the exchange will adjust the margin account of each member according to the settlement price of the day to reflect the profit or loss of the investor. If the price changes in a direction that is not conducive to investors' holding positions, investors must add margin after daily settlement. If the margin is insufficient, investors' positions may be forced to close.
leverage effect. Stock index futures use margin trading. Since the amount of margin to be paid is determined according to the market value of the traded index futures, the exchange will decide whether to add margin or whether to withdraw the excess according to the market price changes.
2. Unique characteristics of stock index futures
The subject matter of stock index futures is a specific stock index, and the quotation unit is calculated by index points.
the value of the contract is expressed by the product of a certain currency multiplier and the quoted price of the stock index.
Stock index futures are delivered in cash, and positions are settled in cash by clearing the price difference instead of delivering stocks.
the difference between stock index futures and commodity futures trading
the underlying indexes are different. The subject matter of stock index futures is a specific stock price index, not a real target asset; The object of commodity futures trading is goods with physical form.
delivery methods are different. Stock index futures are delivered in cash, and positions are settled in cash by clearing the price difference on the delivery date; Commodity futures, on the other hand, are delivered in kind and cleared by the transfer of physical ownership on the delivery date.
the degree of standardization of contract expiration dates is different. The expiration dates of stock index futures contracts are standardized, generally in March, June, September, December and so on; The maturity date of commodity futures contracts varies according to the characteristics of commodities.
the cost of holding is different. The holding cost of stock index futures is mainly financing cost, and there is no physical storage cost. Sometimes there are dividends in the stocks held. If the dividends exceed the financing cost, there will be holding income. The holding cost of commodity futures includes storage cost, transportation cost and financing cost. The holding cost of stock index futures is lower than that of commodity futures.
the speculative performance is different. Stock index futures are more sensitive to external factors than commodity futures, and the price fluctuates more frequently and violently, so stock index futures are more speculative than commodity futures.
The background and development of stock index futures
With the continuous expansion of the stock market and the growth of institutional investors, the market has an increasingly urgent demand to avoid the unilateral huge ups and downs of the stock market. Both investors and theoretical workers are increasingly calling for the introduction of stock index futures to avoid the systemic risks of the stock market, and the decision-makers are also extremely concerned about this issue. So is it ripe for China to launch stock index futures at present? What impact does the introduction of stock index futures have on the securities market? How to design China's stock index futures contract? Since this issue, this edition has specially opened a column "Research on Stock Index Futures" to discuss the above issues. Welcome people inside and outside the industry who are interested in stock index futures to participate in the discussion, and make suggestions to promote the research and development of stock index futures in China.
Like other futures trading varieties, stock index futures are also produced to meet the market demand of avoiding price risks.
After World War II, the stock markets of developed market economy countries, represented by the United States, have made rapid development, the number of listed stocks has been increasing, and the stock market value has expanded rapidly. Take new york Stock Exchange as an example: in 198, its stock trading volume reached $374.9 billion, 3.93 times that of 197; The average daily turnover was 44.9 million shares, 19.96 times that of 196; There are 33.7 billion shares listed, with a market value of $1,243 billion, 5.185 times and 4.5 times that of 196, respectively. The rapid expansion of the stock market is also a process in which the structure of the stock market is constantly changing: after World War II, institutional investors represented by trust and investment funds, pension funds and mutual funds have achieved rapid development, and they occupy an increasing proportion in the stock market and gradually occupy a dominant position. Institutional investors reduce risks through decentralized investment portfolio, but risk management of portfolio investment can only reduce and eliminate non-systematic risks of stock prices, but can not eliminate systematic risks. With the increasing number of stocks held by institutional investors, the demand for avoiding systemic price risk is becoming stronger and stronger.
the stock trading mode is also developing and progressing. Take the United States as an example: the initial stock trading was aimed at a single stock. In 1976, in order to facilitate the trading of retail investors, new york Stock Exchange launched the designated trading cycle system (DOT for short), which directly linked the order rooms of exchange member units with the trading pool. Since then, the system has developed into a super designated trading cycle system (SDOT for short). For small trading orders with less than 2,99 shares, the system guarantees that the transaction will be completed within three minutes and the results will be fed back to the customers. For large trading orders, although the system does not guarantee that the transaction will be completed within three minutes, there is no doubt that it enjoys certain advantages and advantages in trading. Almost at the same time as the designated trading cycle system, stock trading is no longer limited to trading a single stock, but can "package" a variety of stocks, and buy and sell a variety of stocks at the same time with one trading instruction, that is, Program trading (also often translated as program trading). There have always been different opinions about the concept of procedural transaction. From the practical point of view, new york Stock Exchange thinks that trading orders of more than 15 kinds of stocks can be called program trading; It is generally accepted that as a trading technique, program trading is a highly decentralized trading of a basket of stocks. The generation of trading signals, the determination of trading quantity and the completion of trading are all completed with the support of computer technology, which is often associated with arbitrage trading activities in the derivatives market, portfolio investment insurance and changing the proportion of stock investment in the portfolio. With the development of procedural trading, stock managers soon began to try to trade and manage the "indexed portfolio". The characteristic of the "indexed portfolio" is that the composition and proportion of stocks are exactly the same as the stock index, so its price changes are exactly the same as those of the stock index, so its price risk is pure systemic risk. On the basis of the practice of "indexed portfolio" trading, it has become a natural thing to develop stock index futures contracts to meet the needs of avoiding systematic risks of stock prices.
Seeing the market demand, the Kansas City Exchange submitted a report on stock index futures trading to the American Commodity Futures Trading Commission in October 1977 after in-depth research and analysis. However, due to the dispute between the Commodity Futures Trading Commission and the Securities and Exchange Commission on the jurisdiction of stock index futures trading, and the failure of the exchange to reach an agreement on the use of the Dow Jones stock index, the report was delayed. It was not until 1981 that Philip M. Johnson, the new chairman of the Commodity Futures Trading Commission, and John Friedrich Hirth, the new chairman of the Securities Trading Commission, reached the "Johnson-Friedrich Hirth Agreement", clearly stipulating that the jurisdiction of stock index futures contracts belonged to the Commodity Futures Trading Commission, which cleared the way for the listing of stock index futures.
On February 16th, 1982, the report of the Kansas City Exchange on stock index futures was finally approved. On 24th, the exchange launched the trading of Dow Jones composite index futures contract. The transaction was very active as soon as it opened, and nearly 18 contracts were sold that day. After that, on April 21st, Chicago Mercantile Exchange launched the S & P5 stock index futures trading, and the trading volume reached 3,963. Japan, Hong Kong, London, Singapore and other places have also started stock index futures trading, and stock index futures trading has since embarked on the road of vigorous development. At present, stock index futures have developed into one of the most active futures varieties, and stock index futures trading is also known as "the most exciting financial innovation" in the 198s.
(I) The emergence of futures market and financial futures
The development history of futures market can be pushed forward to Japan in the 16th century, but it was not until the Chicago Board of Trade (CBOT) was formally established in 1848 that futures trading entered an organized era. In fact, the original Chicago Board of Trade was not a market, but a naturally formed chamber of commerce to promote the industrial and commercial development of Chicago. It was not until 1851 that the Chicago Board of Trade introduced forward contracts. Because the grain transportation at that time was very unreliable and the ship flights were irregular, it took a long time for the supply and demand information from the eastern United States and Europe to reach Chicago, and the grain price fluctuated considerably. In this case, farmers can use forward contracts to protect their interests and avoid losses caused by falling prices or insufficient demand when transporting grain to Chicago. At the same time, processors and exporters can also use forward contracts to reduce the risk of rising processing costs caused by various reasons and protect their own interests. Since the initial and most important function of futures exchange is to provide a place for spot price risk transfer, we can see the evolution of economic structure in various times from the contracts of futures trading.
in the history of the futures market for more than 15 years, the most important milestone was that on May 16th, 1972, the international money market (IMM) of Chicago Mercantile Exchange (CME) launched Foreign Gurrency Futures, which marked the birth of a new futures category, financial futures, and thus set off a golden age for the development of the futures market. In October, 1975, the Chicago Board of Trade launched the first interest rate futures contract, namely, mortgage certificate futures trading of the National Mortgage Association (GNMA). In February 1982, the Kansas Futures Exchange (KCBT) launched the value line composite index futures trading. In just ten years, Interest Rate Futures and Stock Index Futures have come out one after another, which indicates that the structure of three categories of financial futures has been formed. The futures market has also undergone structural changes due to the participation of financial futures. In 1995, the trading volume of financial futures accounted for about 8% of the total trading volume in the futures market (see the table below), and it remained in the mainstream position in the futures market. In addition, the birth of financial futures gives countries and regions outside the United States the opportunity to develop futures markets. Since 198, these countries and regions have set up their own futures exchanges. By 1993, the trading volume of futures exchanges in these countries or regions had surpassed that of the United States, and the growth rate was extremely alarming.
(II) The emergence of stock index futures (197s)
Like foreign exchange futures, interest rate futures and other commodity futures, stock index futures are also produced to meet the needs of people to avoid risks, and are specially designed for people to manage the price risks in the stock market.
according to the modern portfolio theory, the risks in the stock market can be divided into systematic risks and unsystematic risks. Systematic risk is determined by macro factors, and it takes a long time and involves a wide range, so it is difficult to avoid it by diversifying investment, so it is called uncontrollable risk. Non-systematic risk refers to the risk of a specific individual stock (or the listed company that issues the stock), which has nothing to do with the whole market. Investors can usually avoid such risks by portfolio. Therefore, non-systematic risk is also called controllable risk. Although portfolio can reduce non-systematic risks to a great extent, when the whole market environment or some global factors change, that is, when systemic risks occur, the market prices of various stocks will change in the same direction. It is obvious that diversification in the stock market alone cannot avoid the risk of overall price changes. In order to avoid or reduce the impact of this so-called uncontrollable risk, people are inspired by the hedging of commodity futures and design a new financial investment tool, jujube stock index futures.
The essence of stock index futures trading is the process that investors transfer their expected risk of the whole stock market price index to the futures market, and offset the risk of the stock market through the trading of investors with different judgments on the stock trend. As the object of stock index futures trading is the stock index, the change of stock index is the standard, and cash settlement is the only settlement method. Neither side of the transaction has real stocks, but only stock index futures contracts are bought and sold.
in the 197s, affected by the oil crisis, western countries suffered from very unstable economic development and sharp fluctuations in interest rates, which led to large fluctuations in stock market prices. Stock investors urgently needed a financial tool that could effectively avoid risks and maintain assets. As a result, stock index futures came into being. Its rise, on the one hand, provides an effective tool for investors who own stocks and will buy or sell stocks, on the other hand, it also gives futures speculators the opportunity to speculate, making stock index futures quickly favored by different investors.
(3) Portfolio Substitution and Arbitrage Tools (1982 -1985)
Three years after the Kansas Futures Exchange introduced the value-line composite index futures, investors gradually changed the traditional way of entering and leaving the stock market, that is, selecting a stock or a group of stocks, and other investment methods were born, including: First, the birth of the Synthetic Index Fund, that is, investment. Second, the use of index arbitrage (), take almost risk-free profits. This is due to the low market efficiency in the first few years when stock index futures were introduced, and the phenomenon of large basis difference between spot and futures prices often appeared. For professional investors with high trading technology, they can obtain almost risk-free profits by trading stocks and stock futures at the same time.
(4) Dynamic trading tools (1986 -1989)
After several years of trading, the market efficiency of stock index futures has gradually improved and its operation is relatively normal, and it has gradually evolved into a handy tool for implementing dynamic trading strategies, mainly including the following two aspects. First, through Dynamic hedging (dynamic)